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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






2. Two goods are consumer substitutes if they provide essentially the same utility to consumers






3. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






4. Ei > 1






5. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






6. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






7. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






8. Costs that change with the level of output. If output is zero - so are TVCs.






9. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






10. Models where firms agree to mutually improve their situation






11. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






12. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






13. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






14. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






15. Ei = (%dQd good X)/(%d Income)






16. When firms focus their resources on production of goods for which they have comparative advantage






17. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






18. All firms maximize profit by producing where MR = MC






19. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






20. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






21. The price of a good measured in units of currency






22. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






23. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






24. Demand for a resource like labor is derived from the demand for the goods produced by the resource






25. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






26. The output where ATC is minimized and economic profit is zero






27. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






28. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






29. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






30. MUx / Px = MUy/Py or MUx/MUy = Px/Py






31. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






32. The additional benefit received from the consumption of the next unit of a good or service






33. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






34. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






35. Occurs when LRAC is constant over a variety of plant sizes






36. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






37. Exists if a producer can produce a good at lower opportunity cost than all other producers






38. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






39. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






40. The practice of selling essentially the same good to different groups of consumers at different prices






41. A firm that has market power in the factor market (a wage-setter)






42. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






43. The ability to set the price above the perfectly competitive level






44. Es = (%dQs) / (%dPrice)






45. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






46. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






47. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






48. Product demand - productivity - prices of other resources - and complementary resources






49. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






50. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand